Pro-Russian separatists have shot down an army transport plane in east Ukraine, killing 49 servicemen and dealing a blow to a military campaign to defeat the rebels and hold the country together.

President Petro Poroshenko promised an "adequate" response after the plane was hit by an anti-aircraft missile as it came in to land at the airport outside the city of Luhansk, a centre of the rebellion against central rule that began in April.

"All those involved in cynical acts of terrorism of this magnitude must be punished," he said, declaring Sunday a day of mourning for the nine crew and 40 paratroopers killed.

He later consulted with his security and defence chiefs but gave no details of how they would retaliate.

Charred debris was scattered for hundreds of metres over the sloping wheat field where the plane came down overnight near Novohannivka, a village 20 km southeast of Luhansk.

The tail section jutted up from the ground, with pieces of the engines, fuselage and other parts lying around it.

A platoon of rebel forces in camouflage scoured the ruins for ammunition that had been intended for the government forces in east Ukraine.

"This is how we work. The fascists can bring as many reinforcements as they want, but we will do this every time. We will talk to them on our own terms," said a stocky 50-year-old rebel who identified himself as Pyotr, his 'nom de guerre'.

He had an assault rifle in one hand, a light machine gun in the other and two ammunition belts round his neck.

TENSIONS WITH THE WEST

The death toll was the highest suffered by government forces in a single incident since the crisis flared in February and is likely to fuel tension between Russia and Kiev's main ally, the United States, which accuses Moscow of arming the rebels.

In a telephone call with Ukrainian Prime Minister Arseny Yatseniuk, US Secretary of State John Kerry expressed condolences for the 49 servicemen killed in the downed plane, a senior State Department official said.

Kerry also spoke with Russian Foreign Minister Sergei Lavrov and warned him that the United States and its G7 partners would "raise the costs" Moscow could face unless it curbed weapons supplies into Ukraine and cut ties with pro-Russia separatists.

Evidence that Russia is sending in heavy armour and weapons could encourage the United States and the EU to impose new sanctions on Moscow, so far limited largely to visa bans and asset freezes on some individuals, banks and companies.

"We condemn the shooting down of the Ukrainian military plane and continue to be deeply concerned about the situation in eastern Ukraine, including by the fact that militant and separatist groups have received heavy weapons from Russia, including tanks, which is a significant escalation," a White House spokeswoman said.

In Kiev, protesters pelted the Russian embassy with eggs on Saturday and ripped up a Russian flag in protest of what they called Moscow's backing of separatist rebels in east Ukraine, witnesses said.

"The United States condemns the attack on the Russian Embassy in Kiev, and calls on Ukrainian authorities to meet their Vienna convention obligations to provide adequate security," a State Department spokeswoman said.

Although Russian President Vladimir Putin denies Moscow is behind the uprising, German Chancellor Angela Merkel and French President Francois Hollande expressed dismay over the attack in a three-way telephone call with him.

Echoing the US criticism, the German government said in a summary of the call that Russia must control its borders effectively to prevent arms and combatants entering Ukraine and use its influence with the rebels to secure and protect a truce.

GAS TALKS

Ukrainian forces yesterday reclaimed from rebel control the city of Mariupol, a major port for export of steel. The Ukrainian flag was raised over regional government headquarters of the city of 500,000 that had long been a focus of clashes.

Ukraine's presidential press service quoted the defence minister as telling Poroshenko more than 250 rebels had been killed in the last 24 hours.

It was also not clear how the rebel death toll was reached by Kiev's pro-European authorities, and the separatists have scoffed at such high casualty estimates in the past.

The separatists say they get their weapons from looted military stockpiles. They shot down a military cargo plane last week, killing three people, and a general was among 14 killed when an Mi-8 transport helicopter was hit on May 29.

Despite the continuing violence, Ukraine and Russia have begun talks on a peace plan and Moscow made a goodwill gesture by agreeing to make a last attempt to solve a gas pricing dispute before a Monday deadline to cut off supplies to Kiev.

Talks were due to resume in Kiev on Saturday evening. Cutting off supplies to Kiev could also cause disruptions to deliveries to the European Union, which gets half its gas imports from Russia through Ukraine.

The talks have been complicated by tension over the uprising in Russian-speaking east Ukraine, which the rebels want Moscow to annexe, as it did Crimea in March. Their calls for a Russian invasion have gone unanswered.

Russia fears losing influence in Ukraine following the overthrow of its Moscow-leaning president in February and its new leaders' pro-Western policies. Ukraine was ruled from Moscow in Soviet times and is seen by Russians as the cradle of their civilisation.